5 Steps to Increasing Profitability and Reducing Costs with “Lean” CRM

Here is a synopsis of an excellent article by Graham Hill, a Partner with Strategyn UK, How to Increase Profitability and Reduce Costs with Lean CRM:

Companies are making deep cuts in anything that isn’t nailed to the floor but they can only cut costs so far before they start to damage their ability to remain a viable business. So the $64,000 question is:

What can companies realistically do today to survive the recession and to thrive once it is over? One answer is to give themselves a lean CRM makeover.

This article is based, in part, on my experiences implementing lean CRM at Toyota, which eventually led to me becoming interim head of CRM for Toyota Financial Services for over a year.

Solving the lean mystery

There is a lot of magic and mystery surrounding lean, yet it is based upon five simple principles that really work wonders. These are the backbone of Lean CRM too…

1. Understand what customers really value

Sounds blindingly obvious doesn’t it? Yet, most companies don’t know what their customers really value because they never ask them. Instead, they use analytics to try and find customers with a high likelihood of buying their current products. The result is that 99% or more of their marketing is ignored by customers, 80% of new products fail on introduction and 60% fail on reintroduction.

Lean CRM starts with a thorough understanding of customers’ needs, through the jobs customers are trying to do and the outcomes they desire from doing them. Using a combination of qualitative interviews and observing how customers undertake jobs, followed by a quantitative survey to validate the jobs and desired outcomes with a larger group of customers, you can discover what customers really value and how satisfied they are with your value delivery. This is the starting point, not only for lean CRM, but also for customer-driven innovation that can raise the innovation success rate from an 80% failure rate to an 80% success rate.

2. Map the value delivery process

Once you understand what customers value, you should follow the value stream from the customer through your company and map the value delivery process. This is different from the process mapping that you are used to. Rather than just look at the processes, value stream mapping looks at them from the perspective of whether and how they create value for customers – and if not, whether they enable other processes to create value for them.

It may come as quite a surprise to find that up to 40% of the activities in even recently re-engineered processes may still be non-value-adding. It goes without saying that these wasteful activities should be removed as soon as possible.

3. Let value flow direct to customers

Once you understand what customers value and how value is delivered, you should restructure your CRM processes so that value flows without interruption to customers. This means removing any process, decision point or other bottlenecks that unnecessarily hinders the flow of value to customers.

Often, this is as simple as taking responsibility for standardised decisions away from staff and embedding them in system business rules. Sometimes it requires moving decision-making authority for more complex rules from supervisors down to frontline staff and providing them with the training to apply them. Occasionally it means giving customers process tools to manage their own business.

4. Let customers pull value themselves

Once you understand what customers value and have improved how it is delivered so that value flows, you should empower customers to pull value directly, as and when they need it.

Most CRM processes are designed around push principles: Because companies don’t know what customers value and, therefore, haven’t organised themselves to deliver it, they push marketing communications at customers and then wait and see what gets bought. As we have already seen, 99% or more of these communications are ignored by customers.
Once you know what customers value, it isn’t too difficult to give customers tools to pull – e.g. product information or even a configured product – from you, on demand. Even where this isn’t possible, critical events in the customers’ life can be sense and responded to as quickly as though the customer had pulled the response themself.

5. Continuously improve value delivery

Once you have got lean CRM up and running, the final step is to continuously improve how it operates using Kaizen. Kaizen is a simple structured step process that looks at potential improvements to your business, sets targets for their improvement and trials them. Only when the trial is successful are they implemented into daily business.

The payback from lean CRM

Lean CRM is a simple yet powerful process to restructure your CRM activities around your customers. By starting with what customers value and using this as a catalyst to reorganise delivery to customers, you can significantly increase your sales whilst significantly decreasing your costs.

The benefits of lean CRM are clear so you cannot afford to be left behind by those competitors who are already implementing it, particularly if you want to survive during this difficult recession and to thrive when it is over.

bookmark to:

Tagged as: CRM Best Practices, customer experience, Leadership-Mgmt, Project Mgmt-ROI